My fear is that 'political' appointments will be the powers-that be at KPLC and it will be downhill all over again. We saw this happening during dan 'the thief' moi's era. Some of the currently active politicians were 'suppliers' to KPLC. They want back in.

Some will argue that we do not need expats, my argument is that the transition should be 'natural' i.e. someone trains under the expats. The expats' mandate should include succession. Firms like KPLC that have significant government control tend to play to the politicians' & not the shareholders' or customers' tune.

Paying Manitoba KShs 80-100 million over 2 years is a far better deal than the BILLIONS that KPLC will lose going forward.

The need for efficiency, quick decisions & technical knowledge is needed more than ever since Kenya faces an electricity shortfall. Kenya needs to negotiate complex new power agreements immediately & start building interconnections with various countries including Ethiopia.

Finally the (online) prospectus that should have available at the launch is now out... there are some restrictions regarding the download but here is the link...Safaricom Prospectus

BTW, MJ - who I thought was S.African - is a US citizen...

Since most banks will provide shares financing, I expect a substantial over-subscription. Most banks will accept the (expected) refunds & alloted shares as security. Many banks want the interest pre-paid for 45-60 days when you take the loan.

Sampling of banks offering loans:

Equity - one of the receiving banks has a sweet deal. They lend money that gets back to them immediately with the application. They can re-lend the funds...

CFC Bank - 75% LTV.

I&M - 75% LTV (max loan is KShs 5mn). They are flexible & great to work with but they do not want 'smaller' loans since they don't have the capacity to handle too many clients.

Transnational - Fanikisha account

There are many more out there... I haven't checked... The banks are limiting the total loans they give for Safaricom to manage risk & liquidity, so apply early... or you will not be able to borrow...

The 'claw-back' from the foreign pool is unlikely since it would require a 200% over-subscription from the domestic pool. This means an extra KShs 65bn has to be applied for before the clawback clause kicks in. Unlikely. Furthrmore, the clawback is proportional meaning its only to the extent the 200% level is maintained.

I DON’T KNOW ABOUT YOU, BUT I am getting rather fed up of seeing our politicians revert to the bad old days of showing off their power through symbols of wealth, such as armoured cars, golfing jaunts and corteges of security personnel (who have a tendency to fly out of moving cars in a show of bravado).

It is almost as if they are completely unaware that thousands of women and children are still living in deplorable camps around the country and that almost the entire country is in a state of depression.

Frankly, most Kenyans don’t care if their politicians drive the latest Mercedes 500S or an old, beaten-up Toyota pick-up.

In fact, given that inequality has been cited as one of the root causes of the recent violence, it appears odd that the leading proponents of equity and justice should now become such blatantly conspicuous consumers of luxury goods.

Perhaps this is not so surprising. As Kalundi Serumaga, a Ugandan film producer who lived as a refugee in Kenya in the 1980s, has said, Kenya has a unique capacity to “normalise the abnormal”.

How else can we explain the fact that a country where half the population cannot afford to eat more than one meal a day is one of the biggest client bases of the Daimler-Benz corporation?

Or that people with an acre of land are killed for their property while those holding on to thousands of acres are not only left alone, but elected to Parliament?

I have yet to hear a politician speak about passing a Bill to cut politicians’ salaries – a sore point with many Kenyans – or talking about the reforms that need to be accelerated now that we have a coalition government.

All we have heard since February 28 is speculation about who might get which ministerial post and whether each tribe will be represented.

Talk about de-ethnicising Kenya has already been forgotten: our politicians, from both sides of the divide, have ensured that ethnicity remains the main criterion for a Government post.

In other more developed countries, it is not unusual to see heads of state mingling with ordinary folk or even using public transport.( I was stunned recently to see a photo of Gordon Brown using the London Underground.)

This is not to say that politicians don’t deserve security or a relatively comfortable standard of living; the point is, these luxuries should be commensurate with a country’s GDP.

So instead of having 100 security officers following them around, why do these leaders not settle for say, 10? Why do they act as if they are running some kind of superpower?

AFRICAN LEADERS HAVE NO HANG-ups about hogging taxpayers’ money at the expense of their own populations, the majority of whom are poor.

They face no moral dilemmas as they squander their nations’ wealth to make their own lives more comfortable, or to build self-glorifying monuments.

This culture of self-aggrandisement has become an epidemic on the continent. Remember Mobutu Sese Seko who built himself eleven “palaces” while his people starved? Or how about the unforgettable Jean-Bedel Bokassa who declared himself “Emperor” of the Central African Republic, and then spent hundreds of thousands of dollars on a coronation ceremony?

Is it not a shame that the poorest region in the world has produced some of the most extravagant leaders?

When a country goes through a revolution, one of the first things the revolution’s leaders do is to institute reforms immediately in order to capitalise on the changed mood in the country.

For instance, when Fidel Castro took over Cuba from the gluttonous General Fulgencio Batista in 1959, the first thing he did was to institute rural land reforms and to make access to health and education the birthright of every Cuban.

Whether or not his policies were the right ones is debatable, but through these reforms, Castro managed to gain the loyalty and support of millions of Cubans who were living in grinding poverty.

Apart from the implementation of free primary education, no significant reforms took place after Kenya’s 2002 revolution.

The moment and the goodwill of Kenyans were wasted as politicians jostled for power or consolidated their personal or political interests.

The 2008 revolution, if I may call it that, has also left a bitter taste in the mouths of many Kenyans, who expected to see genuine commitment among leaders to address historical injustices and to bring about greater equity.

This may still happen, but the momentum is probably already lost, as it was in 2002.

What Kenyans don’t want to see is the establishment of dozens of lengthy, money draining commissions of inquiry, as was done in 2003, which will serve only to gloss over – and bury – some of the more painful truths about how this country has been governed in the last 40 years.

Ms Warah is an editor with the UN. The views expressed here are her own and do not necessarily reflect those of the United Nations. (grasp@nbi.ispkenya.com)

Wednesday, March 26, 2008

As expected the cracks in the Grand Coalition have started showing... it all started innocuously when there was a delay in naming the cabinet...

Apparently PNU wants the inconsequential ministries given to ODM. In addition, PNU wants 44 ministries to accommodate its allies including KANU & ODM-K. Even I have to agree with Anyang Nyongo about the "Ministry of Nairobi Metropolitan Development and Implementation of Vision 2030"... Even the Harry Potter books can't come up with such names... yes, truth is stranger than fiction!!!

Crime soars... and is affecting the lifeline of Kenya. The irony is that the Coast Provincial Criminal Investigation Officer, Mr Benard Mate, calls the crimes "normal cases of thuggery"... is he serious? Since when was thuggery normal?

Nyongo gaffed about the pricing... seriously... he should keep quiet about stuff he has no idea about. So what if SafCon is priced at 5/-? It is the PE Ratio, NAV and other market factors that count! Furthermore, KQ's OFS was at 11.25 not 6/-... If SafCon had only 10bn shares (not 40bn) then the selling price could have been 20/-...

Anyway, parliament is 'closed' and will reopen around 15 April 2008. Sigh... to be an MP... Of course this means no questions from MPs... the ministers are all from the PNU alliance... raila needs to smell the coffee...

Wednesday, March 19, 2008

BAT released excellent results for FY2007. They are introducing new 10-stick packaging ahead of the Anti-tobacco legislation. BTW, BAT recorded the highest PAT in its history even with the pending Anti-Tobacco legislation & ad-hoc by-laws by many municipalities.P.S. I do not smoke. I think it is a nasty habit. But as an investment... sigh... I struggle... should buy shares I or not?

Co-op Bank plans an IPO in 3Q 2008... yes, the bank that went through a rough patch after the US Embassy bombings in Nairobi is now immensely profitable as agricultural fortunes improve for farmers. My gut feeling is that Co-op Bank needs to clean up their books before the IPO. There are many co-ops & saccos who are in poor shape. The government guarantees & write-offs promised to coffee farmers, etc has definitely bolstered Co-op Bank's balance sheet quality.They want to raise KShs 5bn to bolster the balance sheet. I like the focus of growth of branches & ATMs. Co-op banks expects PBT to hit KShs 3.5bn during 2008. Not bad!

KCB plans a Rights Issue to raise KShs 5bn in 2Q 2008. It will probably be after the SafCon OFS is completed. No-one wants to go head to head with SafCon... Expansion into E.Africa is on the books.

Olympia Capital is back in the news after a lengthy period of silence after raising KShs 420mn (gross) during its Rights Issue in 3Q 2007. OCC (its 51% subsidiary based in Botswana) is back in the acquisitions game. The SA acquisition of a complementary player in the building sector is expected to close in 2-3 weeks. OCC's largest division is Plush of SA.OCHL's results are expected by 31 may 2008. The recent fall in price to 11.50 makes it rather attractive considering the Rights were at 14/- just 6 months ago.

Chase Bank owns a broker. Smart purchase back in the day. Suddenly, the bank itself is in play! BTW, Gachui of TransCentury owns shares in the bank. Well... that means, TC could wind up owning a bank & a broker...

BIDCO wants more farmers to grow sunflowers for their Oil plant in Eldoret. I hope Kenyan farmers take up the challenge to reduce dependence on imported cooking oils. There is also demand for cotton seeds for their oil. I think BIDCO will be the next huge firm to go public by 2010.

Essar is making big bets in Kenya. One of them is through Econet & there is the refinery. They are not easy pickings with the Kenyan government hamstringing Econet & the refinery deal. Good luck to them. I do hope Econet can lower the costs of calling in Kenya.

Sasini's coffee shops seem to doing well. Sasini raised 600mn last year to fund expansion. Well,,, good luck to them! I am not a huge fan of Merali firms since they generally perform poorly but Sasini may buck the trend with high coffee prices.

Well... the above is certainly a break from the gloomy stuff of the past few weeks...

The SafariCon OFS is about to start. I am waiting for the prospectus before I make a decision.

Since the OFS has been hyped for so long, there is a huge local - and foreign - pent-up demand for the shares. The 'unchallenging' price of 5/- will push the OFS to all reaches of Kenya.

As discussed earlier, 10,000/- is affordable for many Kenyan households.

I have been asked what other shares look 'good' since prices have dropped as retail investors sell off other shares to apply for SafCon.

Olympia - Yesterday, it dropped 9.5% to 11.55 which makes no sense. OCHL's main business units are in the S.African region. The year end was 29 Feb 2008 and the results should be released by 31 May 2008. OCHL had a successful Rights Issue in 2H of last year.

Kenya Airways - It has been flirting with the low-50s. It is challenging to be an airline but KQ remains dominant in profitable E & C Africa. As incomes rise so do passengers. I hope the Kenya Airport Authority will expand the airport to cope with KQ's forecasts of 4mn passengers by 2010.

Equity - It just keeps on growing. I think it needs to drop further. Definitely worth buying at the rate of growth!

Barclays - They have expanded rapidly in 2007 and I expect further growth in 2008 with the new branches & aggressive expansion into alternative methods of sale/promotions.

Kenol - Aggressive growth in E & C Africa. Buying Kobil with mostly Kenya assets will be a drag. The gains from lower corporate costs as well single brand identity will benefit Kenol.

KCB - Get ready for the Rights. Regional growth is being ramped up in Uganda, S. Sudan & Tanzania.

Monday, March 17, 2008

Well... as Safaricom's OFS comes closer, other shares are being sold to fund the purchase of SafCon... BTW, Bankelele reckons its better to buy SafCon after the shares start trading...

Let's look at the numbers... 10bn shares @ 5/-. Please note that 3.5bn shares will be sold to 'foreigners' thus reducing the shares available to Kenyans to 6.5bn. I assume the 3.5bn will be picked up by the various foriegn funds & overseas Kenyans.

Ugandans & Tanzanians are considered locals thus we will have over 1mn CDS accounts. The minimum application is 10,000/- (2,000 shares @ 5/-).

6.5bn x 5 = KShs 32.5bn

So all we need are 3.25mn applications for 2,000 shares & the OFS is over-subscribed.

There are at least 800,000 CDS accounts = minimum applications for KShs 8bn.

Another 200,000 accounts are expected to be opened by E.Africans = minimum applications for KShs 2bn.

There must be at least 10,000 Kenyans who can apply for KShs 1mn. Many of these in Nairobi. Add an additional KShs 10bn.

There must be 100,000 Kenyans who can apply for Kshs 100,000. Pick your towns like Eldoret, Nakuru, etc. Add an additional KShs 10bn

There must be at least 10,000 diasporans (USA, UK, Dubai, S.Africa) who can apply for 100,000/- thus an additional KShs 1bn.

Most banks will finance SafCon's shares. I expect most banks will provide additional financing upto 75% of the application. Not all applicants will borrow but even if 100,000 people borrow 100,000/- it equals to Kshs 10bn.

I am already at KShs 51bn. So... of course, there will be an oversubscription....

It makes sense to temper the purchase/application for SafCon and buy other shares falling in price...

When the refunds come in... there will be a scramble for the other shares. Many investors will repay the loans BUT others will keep the loans. I expect banks e.g. Equity will see an upsurge in their loan books.

Friday, March 14, 2008

Will Kenya ever make it out of its morass? No, not the recent political violence but the constant corruption we see since jomo kenyatta's days as president?

Massive land grabbing by those politically connected to jomo "the land grabber" kenyatta was the order of the day. The kenyatta family still 'owns' 1000s of hectares of stolen land at the Coast & Central provinces while needy families have nothing.

The theft & corruption during dan "the idiot" moi's days as president is mind-boggling but he is still a free man dispensing unwanted advice. Goldenberg remains a scandal that cost Kenya 10 years of development.

We have all read about anglo-fleecing during mwai kibaki's first 5 years. amos wako who was the legal brain behind the approval of these deals is still AG. I am troubled by the following stories barely into kibz' second 5 years. Is there no resolve to stop the vice?

The delayed sale of the refinery seems to be due to some lopsided deal/promise the Kenya government made with the Libyans. This delay will hurt Kenya's economy as Uganda & Sudan will ship their oil elsewhere for refining. Incompetence? Or did the Libyans grease the wheels?

Kenyans will die while the top dogs make merry. Corruption means deadly chemicals are dumped in Kenya because corrupt heads at the KPA - & KRA - are not paying attention. Or were bribed.

I don't get these idiots at the CMA. Was someone paid off or is it just sheer incompetence? We have 2 brokers down & in each case the situation was allowed to degenerate to horrendous levels. A point to remember is that edward ntalami was in charge of the CMA when the crap started hitting the fan. ntalami was also behind a collapsed broker - Sterling Securities. Hmmm?

The list is an - somewhat skewed - indictation of what economic reforms can do for a country. Africa has a few billionaires - Dangote of Nigeria & some S.Africans - but the combined wealth of the top 4 Indian billionaires is far greater than most African countries' GDP.

Unlike many Kenyans - and Africans - who continue harping about 'colonialism'... India has moved on... look at the list below and you will notice that many of them were born post-1947 (51 years or younger)... I would say the cut-off age should be 56 years since kids start nursery at around 5 years thus anyone born after 1942 in India was a post-independence child.

Using the same metric as above, Kenya is far behind the curve. Well, at least officially. There may be one or two. Any suggestions on who? Can the wealth be verified?

With the weakening US$ & 8% economic growth in India, I would not be surprised to see the Indian fortunes in US$ rise even higher by end of 2008.

I have said that Kenya (and Africa) needs to look at India for development ideas. It remains a model for African countries.

It has:

Democracy - albeit often flawed

Diverse population, cultures & languages

Wide economic base that was very low 20 years ago

Agragian based economy until 5 years ago. Agriculture still remains the core mainstay for most Indians

A former British colony - I don't think this is a handicap. I am just saying that Africans should quit moaning

There has been a huge increase in positive investor sentiment as evidenced by the various investor conferences all over the world focused on Africa.

When a luminary like Mark Mobius attends one of these... erm, something is cooking...

So I managed to take a snap with MM... I will have to upload it one of these days... then there is Warren Buffet... yep, I will get him to pose with me as well... and perhaps get a stock tip or two?

Africans have a nasty habit of playing down what 'foreigners' can bring to the table. Yes, Africans are the masters of their own destinies BUT take all the help you can get!!! Why do we want to re-invent the wheel?

The potential is huge. We know the problems exist but an open society with less deference to ignorant elders or leaders is a step to overcoming obstacles. Father does not always know best.

I will blog on a firm that has an excellent product that every investor in Africa should use... more later...

Mauritius is off the starting blocks... will Kenya catch up? Mauritius has got a flat tax rate. Yes, easy to implement. Laffer had it right!!!

Mauritius is small. Yes, small but it attracts more FDI than Kenya does. Why? Smart policies. Kenyan politicians - most of whom care only about themselves & their wives, kids & misstresses - are dithering while other African countries are adopting progressive policies.